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Spiotta v. Shelter Cove Estates

Decided: July 3, 1961.


Goldmann, Foley and Lewis. The opinion of the court was delivered by Foley, J.A.D.


Defendant Reid Contracting Co., Inc. appeals from a final judgment in a foreclosure action.

The basic facts are not in dispute. On April 9, 1958 defendant corporation sold a tract of unimproved land in Ocean County, N.J. to Shelter Cove Estates, a corporation. The purchase price was $245,000 of which $100,000 was paid at the closing, the balance being secured by a purchase money second mortgage of $145,000. Concurrently, plaintiff loaned Shelter Cove Estates $100,000 in exchange for a two-year purchase money first mortgage of $150,000 with interest at 6% per annum. The $100,000 was immediately turned over to Andrew B. Reid, president of Reid Contracting Co., Inc., as part consideration for the sale of the property. The remaining $50,000 was retained by plaintiff as a premium. All parties were present at the closing.

The second mortgage contains the following recital:

"This is a second mortgage under and subject to a first mortgage given this date on the aforesaid described premises by Shelter Cove Estates to Joseph Spiotta * * *."

On October 1, 1959 plaintiff instituted these proceedings, Shelter Cove having defaulted in the payment of interest and taxes. At this time the principal sum allegedly due had been reduced to $100,500. Shelter Cove did not answer and on February 3, 1960 a default was entered as to it.

Defendant Reid filed an answer admitting the priority of plaintiff's mortgage and averred that it had "no information sufficient to form a belief with regard to the allegations contained in plaintiff's complaint and [left] plaintiff to its proofs as to the amounts due it * * *." Further, defendant requested that its lien be reported upon. The answer contained no allegations whatever affirmatively attacking the validity of plaintiff's mortgage, or the legality of the transaction of which it was an outgrowth.

On or before February 15, 1960 plaintiff and defendant submitted their respective bonds, mortgages and affidavits

to Standing Master William H. Donnelly for an adjudication of the amount due on each mortgage, pursuant to R.R. 4:82-3. Reid's proofs were accompanied by a letter from its president in which, according to the standing master, he took "the position that the first mortgagee should be put to formal proof on the amount due on the mortgage." Thereupon, the proofs were returned and plaintiff advised that it would be necessary for him to move for a summary judgment in the Chancery Division, the standing master noting that there "is a presumption that the amount stated in the mortgage is the true amount but if Mr. Reid objects he has the burden of overcoming this presumption * * *."

Pursuant to this direction plaintiff moved for summary judgment under R.R. 4:58 and supported his motion with his affidavit in which he alleged his version of the facts relating to the transaction, and verified an attached schedule which detailed the payments received on account of the claimed indebtedness of $150,000, the accrual of interest and the balance of principal and interest due as of June 1, 1960.

In resisting the motion defendant filed an affidavit of its president, in which he deposed that he was "fully familiar with the transactions which led to the giving of a purchase money mortgage by the defendant, Shelter Cove Estates to plaintiff herein, and the giving of a second purchase money bond and mortgage in the sum of $140,000 to Reid Contracting Co., Inc., on the same date * * *." Mr. Reid went on to state that so far as he knew plaintiff "only gave defendant Shelter Cove Estates the sum of $100,000 at the time of the execution and delivery by Shelter Cove Estates, of its bond and mortgage for the sum of $150,000." He stated further that the purpose of the motion for summary judgment was "to enrich the plaintiff to an extent far beyond what he is entitled to," and concluded by urging that plaintiff be "put to his proof concerning the amounts of money actually paid by him to defendant, Shelter Cove Estates, in consideration for the

execution and delivery by Shelter Cove Estates, to plaintiff, of the purchase money bond and mortgage in the sum of $150,000."

At this point we deem it advisable to assess the state of the pleadings and proofs before the trial court in light of the principles governing the determination of a motion for summary judgment. The complaint and plaintiff's supporting affidavit, as described, clearly made out a prima facie case entitling plaintiff to a judgment determining that the amount due on the first mortgage was as claimed. R.R. 4:82-3 provides that the plaintiff's proof in a foreclosure action "may be submitted on affidavit * * * unless the court or standing master requires other proof." However, it confers no right on a subsequent mortgagee to demand proof other than by affidavit. Hence, as the standing master said, defendant became burdened with going forward with proof by affidavit, or otherwise, to controvert plaintiff's case, to the extent that a palpably genuine issue of fact would appear by reason of conflicting evidence.

The affidavit of Mr. Reid in our judgment did not constitute such proof. It recited merely that he understood that plaintiff had advanced only $100,000 for the mortgage of $150,000 (a fact which plaintiff readily conceded in open court), and that plaintiff would be unjustly enriched if his lien was fixed on the basis of the face amount of the bond and mortgage. In this connection we note that unjust enrichment was not pleaded as an affirmative defense nor was usury so pleaded. Plainly, compliance with R.R. 4:8-3 requires the pleading of matters constituting an avoidance or affirmative defense. It is noted also that usury was not mentioned in Mr. Reid's affidavit. It is pertinent also to observe that had defendant desired to avail itself of the liberal pretrial discovery procedures ...

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